As we get deeper into this out-of-the-blue situation, we are seeing further over the horizon. It’s becoming evident how the government will react, what economic effect it will bring and gives us an idea for our planning.
The economic slowdown it clearly effecting housing. The interest rates are great, the pre-virus economy was stable albeit long in the tooth and the recession we all saw off in the distance didn’t seem damaging. To me, that means fundamentally we were are in good shape. And then “Along Comes Mary.
The one place dramatically effected is the secondary market. Vacation and second homes are largely discretionary, funded by investment vehicles like the stock market. With the stock market losing about 30% of its value, the families who could afford waterfront properties don’t feel as motivated today. I don’t want to suggest second homes are purchased with cash – that’s only 4% of buyers. Besides, in a world where 3.5% mortgages are normal, who would use cash?
Jumbo loans to finance these properties would be super low if you can find one. Banks are not eager to make big loans with a headwind and so, they aren’t. Because of the low available of larger loans, recent listing here in Mason, Thurston and Kitsap Counties are mostly below market prices.
Olympic Peninsula waterfront properties for sale on Puget Sound are now very rare. Buyers have disappeared unwilling to risk their health for something that could easily be cheaper in the near future.
Because the economy is essentially in good shape, this appears to be a “V”-shaped recession (down quick – quick recovery) but how that will affect second home prices on the other side of this remains a question. Windermere chief economist Matthew Gardner sees a 10-15% decline in prices but admits how long that will last is yet to be determined.